Buy Dena Bank; target of Rs 123: Angel Broking

Angel Broking is bullish on Dena Bank and has recommended buy rating on the stock with a target of Rs 123 in its November 15, 2012 research report.

“Dena Bank posted a healthy performance on the operating front during 2QFY2013, with a growth of 15.9% and 24.2% yoy, respectively in operating income and operating profit. On the earnings front, the bank witnessed a healthy growth of 23.8% to Rs240cr.”

“During 2QFY2013, the bank continued with its aggressive pace of business growth, as both advances and deposits witnessed strong growth of 37.8% and 30.1% yoy. The loan growth was primarily driven by growth in priority sector advances and MSME book. CASA deposits grew at a healthy pace of 16.4% yoy, largely aided by strong growth in current deposits, even as growth in saving deposits remained moderate. CASA ratio declined by 376bp yoy to 31.9%. Yield on advances declined by 14bp qoq, while the cost of deposits declined by 4bp qoq on account of the sequential improvement in the CASA ratio. Hence the reported NIM declined by 20bp qoq to 2.9%. The non-interest income (excluding treasury), grew at a subdued pace of 4.8% yoy, on back of lower recoveries from written-off accounts."

"The bank witnessed asset quality pressures, with both gross and net NPA levels increasing sequentially by 8.8% and 20.7%, respectively. Slippages came in at Rs288cr compared to Rs192cr in 1QFY2013 and Rs244cr in 4QFY2012. As per the management, incremental slippages were granular in nature, except for ~Rs90cr coming in from two accounts. Annualized slippage ratio came in at 2.0%, higher compared to 1.4% in 1QFY2013. PCR dipped by 315bp sequentially to 72.5%. Additionally, the bank restructured advances worth Rs300cr compared to ~Rs852cr restructured in 1QFY2013. As of 2QFY2013, the bank’s outstanding restructured book stood at ~Rs4,500cr, out of which ~Rs4,375cr constitutes standard restructured advances. As per RBI’s 75bp increase in provisioning requirement for standard restructured advances, the additional provisioning requirement would be Rs32cr.”

“Despite weak macro fundamentals, the bank has aggressively grown its loan book in FY2012. We remain cautious on the bank’s asset quality, in-line with the sectoral outlook. Considering the valuations that the bank is trading at (0.7x FY2014 ABV), we recommend an Accumulate rating on the stock with a target price of Rs123,” says Angel Broking research report.

Non-Institutions holding more than 90% in Indian cos

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